News & media

Cheap and nasty economics (Courier Mail)

February 1, 2008

Posted by: Charles Berger

The Traveston dam proves the lowest bid isn't always the best option.

THE astronaut John Glenn, asked what he felt as he sat in the Apollo capsule awaiting launch of the first manned flight to the moon, is reported to have said: “I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts, all built by the lowest bidder on a government contract.”

It’s amazing the sort of clarity that comes from sitting in the nose of a moon-bound rocket. A decision-making process that made perfect sense to a cost-conscious bureaucrat didn't seem so sensible to the man who had to live with the consequences.

The uncomfortable truth is we’re living in a low-bid economy and we all take a turn sitting in the nose cone from time to time.

Of course we don't call it a ‘low-bid’ economy. Instead we call it an ‘efficient’ economy.

Efficiency is great, when we get the same real value for less money. But too often the low bid turns out to be less durable, less reliable, more toxic, not recyclable, more likely to blow up, more likely to put people out of work, more likely to finish off an endangered fish or turtle.

The cheap toys end up having lead paint; the cheap electricity turns out to be destructive to our climate.

The low bid promises a good deal, but much of the time we end up sacrificing things that are of real and lasting value to us – our health, our environment – in exchange for a transient cost-saving exercise that runs through our fingers like sand.

The people of the Mary Valley know what it’s like to sit in the nose cone. They’re dealing with one of the stupidest low-bid options in recent memory: the Traveston Crossing dam.

Not only will the proposed dam obliterate good agricultural land, as well as the last remaining natural habitat of at least three of Australia’s most threatened species – the Mary River turtle, the Queensland lungfish and the Mary River cod – it also doesn’t stack up economically.

The economic assessment for the Traveston dam fails to follow state and federal government guidelines on assessing the social, economic and environmental costs of the project and fails to compare those costs with real alternatives to the dam.

Demand management – householders and businesses doing things differently to reduce the demand for water – was not considered in the Queensland Government’s recent environmental impact statement (EIS) as an alternative to the dam.

Demand management comes in many guises. Using recycled water rather than fresh drinking water to cool power stations is an obvious example that would save billions of litres of water a year.

The first deliveries of recycled water from the Bundamba Advanced Water Treatment Plant to Swanbank Power Station began in September 2007; and there is no good reason why similar initiatives should not be immediately implemented at all the region’s power generation stations.

Then there’s the widespread deployment of the humble water tank.

Rainwater tanks collect and store water far more efficiently than dams. They can capture virtually every drop that lands on the roof catchment – and the stored water does not evaporate, as it does from open reservoirs.

The water industry has not factored in these savings when arguing against rainwater tanks.

Experts at Sydney’s University of Technology believe demand management could deliver an extra 230 billion litres of water each year at a cost of about $1.15 a kilolitre. In contrast, the current proposal for the Traveston dam would deliver just 70 billion litres at $3.38–$4.65 a kilolitre.

It turns out the low-bid option is not even cost-competitive.

But even taking the Queensland Government's own analysis at face value, better options exist. According to the EIS, an alternative of building modular desalination plants, which are developed over time and increase water output as needed, would cost only 3 per cent more than the dam.

Have we become so enamoured by the low bid that a skinny 3 per cent cost saving is a good enough reason to destroy good land, flood a thriving agricultural community and consign already threatened species to near-certain extinction in the wild?

None of those costs are reflected in the economic assessment put forward in support of the proposed dam, which looks only at the cost of building and operating the dam, but doesn't count the collateral damage inflicted on the community and environment.

A word of advice to governments considering big new infrastructure projects: When making your decision, ask why the low bid is the low bid. Is it because it's really the best value for money, or is it because there are other costs involved that haven't been included in the analysis?

And don’t just try to answer that one yourself. Ask the people in the nose cone instead.

Charles Berger is the Australian Conservation Foundation’s Director of Strategic Ideas